Remote work or work from home jobs have become increasingly more common, especially in the digital and tech industries. And managing a team that works remotely can save money and increase productivity — if you manage your remote team effectively.
But staying compliant can be especially tough when hiring remote employees in other states. States have different requirements for employers, and there’s a lot to keep track of. Here's a brief overview of some of the rules to keep in mind when hiring in a new state.
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Staying Compliant When Hiring Employees In A New State
The legal requirements for conducting business vary on a state-by-state basis. Employers of remote employees must always be mindful of the state and local laws where their remote employees reside and determine which employment laws apply to their remote employees.
Your remote worker will be considered an employee in his or her state of residence, not the state where your company is based. Start by registering with each applicable state’s Department of Labor and become familiar with their employment requirements.
Learn how to hire and manage employees in a new state.
While we’d like to break down each state's employment requirements, there’s just too much to cover. However, there are several key items you’ll want to review for compliance in any state. Although this is not an exhaustive list, the topics outlined below should help to get you started.
Different states have different income tax requirements. You'll need to stay on top of each state's filing deadlines, tax rates, and tax changes.
Consider finding a company that can help you manage processing payroll. For example, Justworks is authorized to operate as a Professional Employer Organization in all 50 states and D.C., and can help companies with respect to payroll.
Wage & Hour Requirements
The Fair Labor Standards Act, or FLSA, is a federal law that regulates minimum wage, overtime, equal pay, recordkeeping, and child labor.
The FLSA generally requires employers to pay employees at least the minimum wage for all hours worked and overtime pay at a rate of 1.5 times the employee’s regular rate of pay for hours worked over 40 in a workweek.
Your remote worker will be considered an employee in his or her state of residence, not the state where your company is based.
Work being performed remotely counts as time worked. Compensate remote nonexempt employees for all hours worked, including work performed at home or another remote location, under the FLSA.
Be sure to check state wage and hour laws for additional requirements, particularly around record keeping, overtime, minimum wage, exemptions, pay frequency and pay statements.
Many federal, state and local labor laws require employers to display posters in the workplace outlining the employee’s rights. Of course, this is a little tough with remote employees who don’t come to your workplace each day.
When permitted, you can provide these employees notice electronically, post them on a company intranet site, or mail them hard copies that they can post at their remote worksite. Again, check all applicable laws to ensure compliance on posting requirements.
Does your new hire have valid work authorization? You’ll need to complete an I-9 form, a federally-mandated form that verifies employment eligibility.
Employers are required to use Form I-9 to verify the identity and employment authorization of each new employee hired after November 6, 1986 to work in the US for wages or other remuneration. Justworks helps streamline the I-9 process for our customers, allowing them to complete electronic I-9s in the Justworks platform.
According to U.S. Citizenship and Immigration Services, “Form I-9 is the core of E-Verify.” In sum, E-Verify compares Form I-9 information to government records online, in order to confirm an employee is authorized to work in the US.
Employers are required to use Form I-9 to verify the identity and employment authorization of each new employee.
Completing Form I-9 is legally required for all employers, whereas participation in E-Verify is voluntary for most employers. Federal contractors and their subcontractors with qualifying contracts that contain the Federal Acquisition Regulation (FAR) E-Verify clause are required to use E-Verify. In addition, some states have E-Verify requirements.
For example, states like Arizona and Mississippi require all employers to use E-Verify, and states like Colorado, Missouri, Nebraska, and Oklahoma require all public contractors to use E-Verify.
Employers should also be familiar with any state laws governing electronic signatures where the remote employee resides, or where the employer operates, that may apply.
Your workers’ compensation policy should also include your remote employees. They may be eligible to receive workers' compensation for injuries or occupational illnesses that occur at home — if the injury or illness arises out of and in the course of employment.
Be sure to specify the remote employee's job duties, work area, work hours, and break times in their employee's job description and telecommuting agreement. This will help you to avoid liability for any potential injuries that are not work-related at a remote employee's home.
As mentioned in the top of this post, we can’t cover everything you need to know in this overview. At the end of the day, you’ll need to carefully review which state and local employment laws apply to your remote employees to make sure you’re compliant.
You may need to withhold for state disability insurance, depending on the state where your remote employee works. If you have remote employees in California, Hawaii, New Jersey, New York, or Rhode Island, there are state-mandated disability insurance requirements.
Carefully review which state and local employment laws apply to your remote employees to make sure you’re compliant.
Some states and local laws require that employers provide commuter benefits. For example, New York City has a law that mandates that businesses with 20 or more full-time employees must offer pre-tax commuter benefits. By signing up for the program, their employees save money on commuting.
Additionally, look for any laws around hiring requirements, vacation, paid sick leave and other leaves of absence, meal and rest breaks, and required disclosures.
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Staying compliant while hiring new employees in different states can be taxing — and it can take time away from running your business. However, it’s worth getting it right, as the failure to comply with the requirements could be costly.
It can be helpful to work with a Professional Employer Organization, or PEO. A PEO assists you with meeting your employment-related compliance obligations, so you can focus on growing your business. Justworks can handle many of the ins and outs — such as withholding, reporting, and remitting payroll taxes, and obtaining workers’ comp and state unemployment insurance.
Because each state has its own employment laws, it is helpful to consult with legal counsel to help you comply with all applicable employment laws. If you're a Justworks customer, our HR support team can help you adapt your policies.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.